Like most Colorado breweries, River North started small. It occupied a tiny taproom in its namesake Denver neighborhood and specialized in one style of beer.
Seven years later, the brewery operates a large production facility north of the city, added new beers and now distributes statewide.
The latest expansion came at the start of the year when grocery and convenience stores began to sell full-strength beer for the first time since before Prohibition.
“It’s obviously a big deal,” said Patrick Annesty, the sales and marketing director at River North Brewery. “It’s a major change to the way things have been done for a long time.”
The question is whether the change is good or bad for Colorado’s craft beer industry. Just days into the grand experiment, the answer is unclear. It may take months to know the full impact.
“It’s going to be a little tumultuous for everyone, brewers and retailers,” Annesty added.
The new law forces craft brewers to make big decisions
For decades, only individually owned liquor stores sold full-strength beer in Colorado. Grocery chains could get a liquor license to sell beer at one location, but all the other stores were limited to near-beer, known as 3.2 beer for the lower alcohol content.
The craft beer industry credited the system with helping it grow to one of the nation’s most robust markets because small and large brewers alike had an opportunity to sell their brews.
The change that took effect Jan. 1 opened new shelves to sell beer but also created more complications. The chain retailers are driven more by sales volume than other retailers and they don’t carry specialty beers. It’s a whole new model that led the Colorado Brewers Guild to design trainings to educate its members.
But the opportunity is obvious. The Beer Institute estimates that convenience stores nationwide sold 29 percent of the retail beer volume in 2017, followed by grocery stores at 24 percent.
“I can’t for the life of me get my finger on how much velocity is going to happen in those grocery stores,” said John Bachman, the beer director for the parent company of Post Brewing in Lafayette. “But I think we have to try, we have to dabble in that.”
Only about 90 of the more than 400 breweries in Colorado are large enough to distribute beer, so the new law will further divide the state’s brewers into two classes based on size. Others, like Post Brewing, are contracting with other brewers. That allows Post Brewing to make enough beer to get its Howdy Western Pilsner in hundreds of King Soopers and Safeway stores.
“A lot of our members will have to decide where to put their investment and where their future growth lies,” said Andres Gil Zadana, the executive director of the Colorado Brewers Guild, a membership organization that represents the state’s craft brewers.
Brandon Capps, the owner of New Image Brewing in Arvada, wrestled with the decision. The brewery is known for more complex and trendy beer styles and self-distributes because it is so small. “I honestly don’t know if grocery makes sense and is the right choice for our brand,” he said.
Ultimately, Capps decided to distribute to roughly 10 metro Denver Safeway stores. “Whichever way (the new law) takes the market, we (would) rather be a part of it than fight it,” he explained.
The decision is not tough for the five largest breweries in the state — New Belgium, Oskar Blues, Odell, Left Hand, Avery and Great Divide, all of which faced the pinch of competition in other states as the number of craft breweries exploded in recent years.
Adam Avery said the lack of grocery store sales in Colorado hurt his brewery’s ability to get in stores in other states, so he welcomes the change. “You have to build your story at home to go to a national player,” he said. “We couldn’t build a story here because there’s no national chain here — we were kind of screwed.”
The new law attracts out-of-state brewers to Colorado market
Just before the law took effect, three of the largest brewers in the craft market began to sell their beer in Colorado to take advantage of the new sales: Bell’s and Founders from Michigan and 21st Amendment from California.
Shaun O’Sullivan, the co-founder and brewmaster at 21st Amendment, said the ability to sell in grocery stores was huge. “That was one of the things that tipped it over the line and we said let’s get in there,” he said at a recent brewery launch event in Denver.
The ability to hit higher sales volume with the new law is the final straw that drew Founders Brewing to the state, too. Michael Bell, the company’s vice president of wholesaler development who was born and grew up in the Denver area, said the early reception in late 2018 was “beyond our dreams.”
The new competition is frustrating Colorado brewers. Kevin DeLange, the owner of Dry Dock Brewing, which intentionally only distributes in Colorado, said the timing is obvious.
“It’s a bummer that all these regional breweries from other states are going to get a lot of shelf space because they have relationships with chains and grocery,” he said.
The industry is closely watching how much space craft brands — and particularly Colorado craft brewers — get on the cold aisle. So far, it’s hard to tell. The transition appears to be taking longer than expected, based on a survey of a handful of Denver area grocery stores, and many beer aisles remain empty with “coming soon” stickers. At the King Soopers in Denver’s Capitol Hill neighborhood, the craft beer selection included about 20 Colorado brands but only represented the largest brewers in the state.
Kris Staaf, a Safeway spokeswoman, would not share the percentage local or craft beer represents on shelves, but she said “you are going to see a lot of different products on the shelves. One of the things that we are hoping to do is highlight some of the local brewers.”
Liquor stores look to retain their craft beer niche
For true craft beer fans, liquor stores will remain the place to shop. Like other Colorado breweries, River North is not sending its special releases and barrel-aged beers to grocery and convenience stores.
Rufus Nagel, the CEO at Molly’s Spirits, a large specialty liquor store in the Denver metro area, said he expects to lose sales of domestic beer, such as Budweiser and Coors, but he doesn’t see a major impact. One way he hopes to mitigate the losses is carrying more variety of craft beer and carrying the newest offerings.
“We are flexible and agile and can work with partners to our mutual benefit,” he said. “Our beer buyer is one person, it’s not a committee. If it’s great beer, we want more of it.”
Updated Jan. 12, 2019, 12 p.m.: An earlier version of this story misspelled the name of River North Brewery’s sales manager, Patrick Annesty.
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